Cash and Kish – Kommersant

Russian banks, in search of new financial routes to the East, reached Iran: on May 17, the media, citing the Deputy Minister of Industry, Mines and Trade of the country, Alireza Peyman-Pak, reported the opening of a VTB representative office there.

The bank itself did not respond to Kommersant’s request, nevertheless, the choice of VTB as the first Russian credit “swallow” looks logical. In December 2022, the bank launched money transfers to the country using bank details for legal entities and individuals. And after the central banks of the countries at the beginning of the year signed an agreement to work on simplifying financial and banking operations by combining the Russian Financial Messaging System (SPFS) with the Iranian System for Electronic Payments Messaging (SEPAM), cooperation should have moved to a practical level.

Until now, Russian banks have tried to enter less odious markets. Branches in India were opened by Sberbank and VTB, Alfa-Bank is setting up a representative office in Vietnam. MTS Bank has opened (and has already closed due to sanctions) a branch in the UAE. In this sense, VTB’s choice is a win-win – in Iran, its sanctioned status will not confuse anyone.

But, as the Red Army soldier Sukhov said in the film “The White Sun of the Desert”, “The East is a delicate matter.” And the Russian bank will still have to get used to these subtleties. To begin with, foreign banks are allowed to open branches only in the free economic zone – on the island of Kish. There are now about three dozen representative offices of foreign banks, the international bank “Iran-Venezuela” and several branches, of which only one is European, and the rest are from neighboring Muslim countries. Yes, and a European bank can be said to be local – Europaisch-Iranische Handelsbank AG, founded back in 1971, that is, before the Islamic revolution.

The difficulties of working in the country are also connected with the need to follow the law adopted in 1983 prohibiting usury. In other words, only Islamic banking is allowed here, and, frankly, VTB is not strong in this matter, although in the early 2010s it planned to issue sukuk (Islamic bonds). In fairness, it should be noted that not a single Russian bank has much experience in this area. The law on Islamic banking in the country has been trying to pass for more than a decade, and at the end of last year, a bill on an experiment on partner financing was approved in the first reading. However, it has not yet reached the second reading. And if we take into account that only two years are allotted for the experiment, it is not necessary to wait for the real law before 2025.

So in the near future, despite the opening of a VTB representative office, in settlements with the Islamic Republic, one will have to rely on SPFS and Mir-Business Bank, a 100% subsidiary of Bank Melli Iran.